2026 Market Rotation Leaves the S&P 500 in the Dust

We are in the midst of a violent leadership shift.

Left-behind names are rallying hard.

The 2026 market rotation leaves the S&P 500 in the dust.

There is a catchup trade that’s been in motion for months. Fed rate cuts, economic strength, and growing Capex have helped unleash a violent risk-on rally in smaller companies.

Back in early December, we made the bold case to buy small-cap stocks aggressively in 2026.

That stance has been rewarded handsomely.

We will add to this theme, showcasing the broadening trend in the S&P 500.

MoneyFlows research has been all over this rotation, early. We’re witnessing one of the best stock picking environments in years.

Today we will unpack eye-popping charts helping you understand how unique 2026 is becoming.

And why this trend will keep going…markets are far from overbought.

2026 Market Rotation Leaves the S&P 500 in the Dust

Last week we reiterated our small-cap preference for this year. We outlined a graphic highlighting how the Russell 2000 is making a big comeback.

That trend has only gained ground.

Look at this. The Russell 2000 is now beating the S&P 500 and NASDAQ 100 in all timeframes the last 52-weeks.

This is a complete reshaping of market leadership.

On a 1-year basis, the Russell 2000 has jumped 18.7% vs just 14.4% for the S&P 500. On a year-to-date basis, small-caps are up 8.7% vs just a fractional gain of .5% for the S&P 500:

But there’s more to this broadening story.

In 2026 a rare occurrence is shaping up inside the large-cap space.

The average stock in the S&P 500 has gained a whopping 4.02% vs the .5% gain for the cap-weighted index.

More impressive, over 64% of the stocks in the S&P 500 are beating the index YTD:

Now why is this happening? It’s simple.

Mega-cap dominance has taken a back seat.

Notice how in 2026, nearly all inflows have been in companies with market-caps below $300 billion.

This helps explain the complete change of character in markets:

And it isn’t just cap-sizes that are shifting. Sector rankings have completely changed as well.

For most of 2025, Technology reigned supreme in terms of flows, technicals, and fundamental qualities.

Today, technology and communications stocks are dead last in rank. Energy, materials, and industrials are at the top:

Let’s say it again: The 2026 market rotation leaves the S&P 500 in the dust.

Let’s now dive into why this trend will keep going.

Market price action is determined by money flows. Period.

When demand is high, stocks go up. When supply is high, stocks go down.

It’s that simple.

Here we can see that money has been rushing into discrete stocks all month. Consider this fact knowing that the S&P 500 is only up .5% this year…this is what a violent rotation looks like through the MoneyFlows lens:

And there’s evidence that this trend of healthy inflows will continue.

Our Big Money Index (BMI), which plots a moving average of all equity flows, is far from overbought (80% red line):

And finally, when you have strong market breadth and participation, like now, outlier stocks are revealed in our data.

Even with Technology ranked nearly last in our process, there are mega outliers in our research…specifically in the RAM space.

3 months ago, I detailed our top technology stocks for October 2025. Included in that report was Micron Technology, Inc. (MU) at a price below $200 per share and SanDisk Corp (SNDK) at a price well below $150 per share.

Both stocks continue to attract capital.

MU is now approaching $400 per share:

SanDisk (SNDK) is now trading above $500.

What’s causing the surge? Institutional buying pressure:

These are the types of opportunities we are helping investors spot…early.

If you’re only focused on the S&P 500 and Mag 7…you are missing one of the best stock-picking environments in years.

We have been all over this trend…helping money managers and serious investors outperform.

Now is a wonderful time to become a PRO member to learn the stocks loved by institutions and crushing the market day after day.

That’s a winning recipe.

Professional money managers and RIAs looking for additional portfolio solutions and unparalleled ETF analysis please reach out about our Advisor Solution and Emerging Advisor Program.

One of the biggest rotations in years is happening NOW.

Don’t miss this opportunity.

And don’t miss our latest chat on How to Profit During High Volatility with special guest Fausto Pugliese. You can also listen via podcast here.